Munich Re reported profits of €527 million and €1.9 billion for the third quarter and first nine months of 2022, respectively, despite an increase in major losses in property and casualty (P&C) reinsurance due to Hurricane Ian losses of around €1.6 billion.
Profit for the quarter increased year on year, but fell slightly for 9M 2022 due to the reinsurer’s higher-than-average expenditure for natural disasters.
In fact, major losses of more than €10 million each totaled more than €2.6 billion in Q3 2022, accounting for 26.9% of net earned premiums and exceeding the long-term average expected value of 13% for both Q3 and 9M 2022.
Hurricane Ian was the reinsurer’s most expensive natural catastrophe, costing €1.6 billion. Nat cats cost the reinsurer €1.8 billion in Q3 2022, up from €1.7 billion in Q3 2021.
At the same time, Munich Re reported man-made losses of €489 million in the period, up from €245 million the previous year.
Furthermore, the company released €344 million in reserves for prior-year basic losses, corresponding to 4% of net earned premiums.
The P&C reinsurance business contributed a negative €343 million to the overall result in Q3, with a combined ratio of 108.2% for the quarter and 96.9% for 9M 2022 as a result of the losses. Premiums, on the other hand, increased dramatically in this operating segment, rising from nearly €8 billion last year to €10.2 billion in Q3 2022.
In life and health (L&H) reinsurance, Munich Re reported a significant increase in profit to €424 million for the quarter, up from €94 million the previous year, while premium income increased to €3.5 billion. The technical result for L&H reinsurance increased from €9 million last year to €293 million in Q3 2022.
Furthermore, losses associated with the COVID-19 pandemic decreased significantly to €35 million in Q3 2022 and €323 million in 9M 2022.
The reinsurance unit contributed €81 million to the overall third-quarter result and €1.2 billion for the first nine months of the year. Munich Re attributes the quarter-over-quarter decline to Hurricane Ian’s costs as well as a lower investment result.
Within reinsurance, the operating result was -€687 million for the quarter, while gross written premiums increased significantly year on year to €13.7 billion.
Turning to the ERGO business, profit reached €446 million in the third quarter and €702 million in the first nine months of 2022, a significant increase for both periods driven by a one-time effect in the ERGO Life and Health Germany segment. All segments continued to see premium growth in the third quarter, with total premium income increasing to €4.7 billion and gross written premiums increasing to €4.5 billion.
Overall, Munich Re reported an operating loss of €346 million in the third quarter, compared to a profit of €204 million the previous year. The other non-operating result was also negative at -€5 million, while the currency result increased significantly to €846 million, owing in part to US dollar exchange gains.
Gross written premiums increased significantly across the group to more than €18.2 billion in the third quarter, and increased by 14% to more than €50.9 billion in 9M 2022.
Munich Re reported that its investment result decreased from more than €2 billion in Q3 2021 to €904 million in Q3 2022 on the asset side of the balance sheet. Overall, the third quarter investment result represented a 1.6% return on average portfolio market value.
In light of the “very positive” business performance so far in 2022, Munich Re has raised its guidance for gross written premiums in reinsurance to €48 billion from €45 billion, and for ERGO to €19 billion from €18.5 billion. The group’s target has risen from €64 billion to €67 billion.
Furthermore, the reinsurer is still aiming for a consolidated result of €3.3 billion for the fiscal year 2022, but warns that this will be much more difficult to achieve given the claims experience and business environment. The company expects a consolidated reinsurance result of €2.5 billion for the year, down from the previous target of €2.7 billion. ERGO, on the other hand, expects a consolidated result of €800 million for the year, up from the previous €600 million target.
In P&C reinsurance, Munich Re now expects a combined ratio of roughly 97% of net earned premiums for the full year, up from 94% previously.
In L&H reinsurance, the company now expects a much higher technical result of €800 million in 2022.
“Financial solidity and professional expertise are of fundamental importance to our clients in times of crisis and guide Munich Re’s actions,” said CFO Christoph Jurecka. Hurricane Ian follows the pattern predicted by science for a warming world. As a result, the increasing likelihood of such extreme storms is baked into our models and must be reflected in pricing.
“The sustainable and dependable service our clients expect from us is founded on realistic analyses of not only natural disaster risks, but also cyber and pandemic risks.” And, despite the fact that Hurricane Ian and the macroeconomic environment have made things significantly more difficult for us, we remain committed to our annual guidance of €3.3 billion. “All areas of business are contributing to long-term positive performance.”